Chapter 7 bankruptcy is one of the fastest and most effective ways to address overwhelming debt. Individuals who qualify for Chapter 7 filings can go from submitting paperwork to the courts to a discharge of eligible debts in a matter of months.
Chapter 7 bankruptcy can help people address credit card debts and medical debts. Unlike Chapter 13 bankruptcy cases, Chapter 7 filings do not require a lengthy repayment plan. Therefore, only certain individuals qualify for a Chapter 7 filing.
What factors determine eligibility for a Chapter 7 bankruptcy?
Income is the main consideration
Without restrictions, individuals capable of paying their debts could potentially abuse Chapter 7 protections. Therefore, those hoping to file a Chapter 7 bankruptcy must wait a certain amount of time after a prior filing.
They also typically need to pass a means test. Means testing requires that the filer estimate their annual income based on what they have earned in the last six months. They then adjust that income by making deductions for certain allowable household expenses. If their adjusted income is below the state median given their household size, the filer may be eligible for a Chapter 7 bankruptcy.
Especially in cases where people have recently lost their jobs or had challenges when operating professional practices or small businesses, a Chapter 7 filing might be the best option available. The total amount of debt, as well as the assets owned by the filer, can potentially influence the best form of bankruptcy to file. Not everyone who qualifies for Chapter 7 proceedings chooses a Chapter 7 filing.
Reviewing financial records with a skilled legal team can help people determine if they are eligible for Chapter 7 bankruptcy. Those who are can potentially discharge certain unsecured debts relatively quickly.
